Commissioner of the Australian Federal Police v Lordianto

[2017] NSWSC 1196

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	Commissioner of the Australian Federal Police v Lordianto [2017] NSWSC 1196
Hearing dates:	8 May 2017; 9 May 2017; 12 May 2017 (submissions); 16 May 2017; 25 May 2017 (submissions)
Decision date:	07 September 2017
Jurisdiction:	Common Law
Before:	Simpson J
Decision:	(1)  Application for exclusion orders is dismissed.  (2)  The applicants are to pay the Commissioner’s costs.
Catchwords:	CRIME – proceeds of crime – Proceeds of Crime Act 2002 (Cth) – application to exclude property from restraining orders under s 330(4)(a) of the Proceeds of Crime Act 2002 (Cth) – when property which is a chose in action is “acquired” – meaning of “third party” – whether applicants had knowledge of criminality by way of “wilful blindness”
Legislation Cited:	Anti-Money Laundering and Counter-Terrorism Finance Act 2006 (Cth), ss 5, 6, 43, 142 Australian Federal Police Act 1979 (Cth), s 69C Evidence Act 1995 (NSW), s 79 Proceeds of Crime Act 2002 (Cth), ss 19, 29, 30, 49, 77, 78, 180, 317, 329, 330, 336, 338 Proceeds of Crime Bill 2002 (Cth)
Cases Cited:	Citigroup Pty Ltd v National Australia Bank Ltd (2012) 82 NSWLR 391; [2012] NSWCA 381 Commissioner of the Australian Federal Police v Fernandez [2017] NSWSC 1197 Commissioner of the Australian Federal Police v Fitzroy All Pty Ltd (2015) 299 FLR 439; [2015] WASC 320 Commissioner of the Australian Federal Police v Kalimuthu (No 3) [2017] WASC 108 Commissioner of the Australian Federal Police v Minh Duc Pham [2015] NSWSC 1383 Croton v The Queen (1967) 117 CLR 326; [1967] HCA 48 Milne v The Queen (2014) 252 CLR 149; [2014] HCA 4 N Joachimson (A Firm Name) v Swiss Bank Corporation [1921] 3 KB 110 Pereira v The Queen (1988) 35 A Crim R 382 Project Blue Sky Inc v Australian Broadcasting Authority (1988) 194 CLR 355; [1998] HCA 28 R v Crabbe (1985) 156 CLR 464; [1985] HCA 22 Russell v Scott (1936) 55 CLR 440, at 450; [1936] HCA 34 Studman v Director of Public Prosecutions (Cth) (2007) 177 A Crim R 34; [2007] NSWCA 285 Sutherland Re; French Caledonia Travel Service Pty Ltd (In liq) (2003) 59 NSWLR 361; [2003] NSWSC 1008
Texts Cited:	Professor Glanville Williams’ Criminal Law: The General Part (2nd ed 1961, Stevens & Sons)
Category:	Principal judgment
Parties:	Commissioner of the Australian Federal Police (Plaintiff) Sanko Lordianto (First Applicant) Indriana Koernia (Second Applicant)
Representation:	Counsel: E A Cheeseman SC/L T Livingston (Plaintiff) T P Mitchell (Applicants)   Solicitors: Australian Federal Police (Plaintiff) Lincolns Lawyers and Consultants (Applicants)
File Number(s):	2016/197077

Judgment

Application for orders under s 29 of the Proceeds of Crime Act 2002 (Cth) from restraining orders under that Act

1. In these proceedings the applicants (Sanko Lordianto and Indriana Koernia) seek, under s 29 of the Proceeds of Crime Act 2002 (Cth) (“the Act”), orders excluding certain specified interests in property from a restraining order made under s 19 of the Act on 28 June 2016. The applications involve consideration of certain provisions of the Act, as well as certain provisions of the Anti-Money Laundering and Counter-Terrorism Finance Act 2006 (Cth) (“the AML Act”).

Relevant legislative provisions

The Proceeds of Crime Act

2. By s 19(1) a court with “proceeds jurisdiction” (which, relevantly, includes the Supreme Court of NSW) must, in the circumstances specified, order either that:

“(a)  [specified] property must not be disposed of or otherwise dealt with by any person; or

(b)  [specified] property must not be disposed of or otherwise dealt with by any person except in the manner and circumstances specified in the order.”

An order made under s 19(1) is referred to as “a restraining order”. “Property” is defined in the Dictionary to the Act (s 338) to mean:

“… real or personal property of every description, whether situated in Australia or elsewhere and whether tangible or intangible, and includes an interest in any such real or personal property.”

An “interest” in property is also defined in s 338, and means:

(a)  a legal or equitable estate or interest in the property or thing; or

(b)  a right, power or privilege in connection with the property or thing;

whether present or future and whether vested or contingent.”

3. Relevantly to the present proceedings, the circumstances in which a restraining order must be made are specified as:

(i)  that a “proceeds of crime authority” applies for the order; and

(ii)  that there are reasonable grounds to suspect that the property is the proceeds of an indictable offence or is the instrument of a serious offence; and

(iii)  that the application is supported by an affidavit of an “authorised officer” stating that he or she suspects that the property is proceeds of an offence, or, where the offence is a serious offence, that the property is an instrument of the offence, and stating the grounds on which the suspicion is held; and

(iv)  the court is satisfied that the authorised officer holds the suspicion on reasonable grounds.

4. By s 329(1) property is proceeds of an offence if:

“(a)  it is wholly derived or realised, whether directly or indirectly, from the commission of the offence; or

(b)  it is partly derived or realised, whether directly or indirectly, from the commission of the offence;

whether the property is situated within or outside Australia.”

By s 336 proceeds of an offence may be derived directly or indirectly.

5. By s 329(2) property is an instrument of an offence if:

“(a)  the property is used in, or in connection with, the commission of an offence; or

(b)  the property is intended to be used in, or in connection with, the commission of an offence;

whether the property is situated within or outside Australia.”

A “serious offence” is defined in s 338 as, inter alia, an indictable offence punishable by imprisonment for 3 or more years and of a particular type, including money laundering crimes; it also includes an offence against s 142 of the AML Act, as to which see below. An “indictable offence” is self-explanatory. Property that is either the proceeds of an indictable offence, or the instrument of a serious offence (inter alia), is referred to as “tainted property” (see s 338).

6. A “proceeds of crime authority” is defined in s 338 to include the Commissioner of the Australian Federal Police, who has by s 69C of the Australian Federal Police Act 1979 (Cth), power to delegate some functions, powers and duties.

7. By s 29 the court to which an application for a restraining order has been made must, in specified circumstances, exclude a specified interest in property from the restraining order, either at the time the order is made, or subsequently. Where the restraining order is made under s 19, the relevant circumstances are stated in s 29(2)(d). The court must exclude the interest where it is:

“neither:

(i)  in any case - proceeds of an indictable offence … nor

(ii)  if an offence to which the order relates is a serious offence - an instrument of any serious offence.”

An order under s 29 is “an exclusion order”.

8. By s 30, a person who claims an interest in property in respect of which an application for a restraining order has been made, but not yet granted, may apply under s 29 for an exclusion order.

9. By s 317, an applicant in any proceedings under the Act bears the onus of proving, on the balance of probabilities the matters necessary to establish the grounds for the order sought. Accordingly, an applicant for an order excluding property from a s 19 restraining order bears the onus of proving, inter alia, that the interest in the property in question is neither the proceeds nor the instrument of a relevant offence.

10. By s 49(1), a court with proceeds jurisdiction must make an order (“a forfeiture order”) that property subject to a restraining order specified in the order is forfeited to the Commonwealth if certain specified conditions are met. It is not necessary here to detail the conditions. However, by sub-s (4), the court may refuse to make a forfeiture order if satisfied that the property is an instrument of an offence other than a terrorism offence, and is not the proceeds of an offence, and the court is satisfied that it is not in the public interest to make the (forfeiture) order.

11. By ss 78(1) and (2) a person claiming an interest in property with respect to which an application for a forfeiture order has been made, or in respect to which a forfeiture order has been made, may apply to a court for a compensation order.

12. By s 77(1), a court to which an application has been made for a forfeiture order, or which has made a forfeiture order, must make a compensation order, if:

(a) the person has made an application under s 78; and

(b)  the court is satisfied that the person has an interest in the property the subject of the forfeiture order; and

(c)  the court is satisfied that a proportion of the value of the applicant’s interest was not derived or realised, directly or indirectly, from the commission of any offence; and

(d)  the court is satisfied that the applicant’s interest is not an instrument of any offence.

13. By s 180, where a restraining order is in force, the court may make orders for the examination of any person, including (specifically) any person whose property is, or who has or claims an interest in property the subject of the restraining order.

14. Sub-sections 330(1) and (2) further expand on the circumstances in which property becomes or remains proceeds or an instrument of an offence (neither of which is here material) and, relevantly, s 330(4) states when property ceases to be proceeds or an instrument of an offence. That sub-section prescribes the only ways in which property that has been tainted ceases to be tainted. Only one of those is here material. Section 330(4)(a) is in the following terms:

“(4)  Property only ceases to be proceeds of an offence or an instrument of an offence:

(a)  if it is acquired by a third party for sufficient consideration without the third party knowing, and in circumstances that would not arouse a reasonable suspicion, that the property was proceeds of an offence or an instrument of an offence (as the case requires) …”

“Sufficient consideration” is defined in s 338 as follows:

“an acquisition or disposal of property is for sufficient consideration if it is for a consideration that is sufficient and that reflects the value of the property, having regard solely to commercial considerations.”

The Anti-Money Laundering and Counter-Terrorism Finance Act 2006

15. By s 43 of the AML Act a reporting entity (which, by ss 5 and 6, includes a bank) is obliged to report to the Australian Transaction Reports and Analysis Centre (“AUSTRAC”), within 10 business days, any “threshold transaction”. A transaction involving the transfer of “physical currency” – that is, cash – of $10,000 or more is a “threshold transaction” (see s 5).

16. Such a transaction is referred to as a “reportable transaction”. It follows that a cash transaction of less than $10,000 is a non-reportable transaction: see s 5.

17. Section 142 of the AML Act creates an offence shortly known as “structuring”. Sub-sections (1) and (2) of s 142 provides:

“(1)  A person (the first person) commits an offence if:

(a)  the first person is, or causes another person to become, a party to 2 or more non-reportable transactions; and

(b)  having regard to:

(i)  the manner and form in which the transactions were conducted, including the matters to which subsection (3) applies; and

(ii)  any explanation made by the first person as to the manner or form in which the transactions were conducted;

it would be reasonable to conclude that the first person conducted, or caused the transactions to be conducted, in that manner or form for the sole or dominant purpose of ensuring, or attempting to ensure, that the money or property involved in the transactions was transferred in a manner and form that would not give rise to a threshold transaction that would have been required to have been reported under section 43.

Penalty:  Imprisonment for 5 years or 300 penalty units, or both.

(2)  Subsection (1) does not apply if the defendant proves that the first person did not conduct the transactions, or cause the transactions to be conducted, as the case may be, for the sole or dominant purpose of ensuring, or attempting to ensure, that the money or property involved in the transactions was transferred in a manner and form that would not give rise to a threshold transaction that would have been required to have been reported under section 43.”

An offence against s 142 is an indictable offence. It is also a “serious offence”, if the structured transactions involve $50,000 or more during any 6 month period (s 338 of the Act).

18. The matters to which sub-s 3 applies are:

“(a)  the value of the money or property involved in each transaction;

(b)  the total value of the transactions;

(c)  the period of time over which the transactions took place;

(d)  the interval of time between any of the transactions; [and]

(e)  the locations at which the transactions took place.”

Procedural history

19. By Summons filed on 28 June 2016 in the Supreme Court the Commissioner of the Australian Federal Police (“the Commissioner”) applied under s 19 of the Act to this Court for a restraining order in relation to five specified accounts held by the Commonwealth Bank of Australia (“the CBA”), three of which were in the name Ms Koernia, and two of which were in the joint names of Ms Koernia and Mr Lordianto. Two of the accounts were known as the First and Second Cash Investment Accounts, and were, respectively, in joint names of the applicants, and in the name of Ms Koernia. The other three accounts were Standard Term Deposit Accounts, two of which were in the name of Ms Koernia and one of which was in the joint names of the applicants.

20. The property the subject of the Summons was identified, in the case of each account, as “Funds standing to the credit of [CBA identified account] in the name of [the account holder]”. At the time, the combined funds in the five accounts totalled just under $6 million.

21. The application was supported by the affidavit of Mr Darren Burtenshaw, a member of the Australian Federal Police (“the AFP”) and an authorised officer for the purposes of the Act. Hall J was satisfied of the matters of which he was required by s 19 of the Act to be satisfied. That is, he was satisfied (inter alia), on the affidavit evidence of Mr Burtenshaw, that there were reasonable grounds to suspect that the funds were either the proceeds of an indictable offence (or offences), or an instrument of a serious offence (or offences). Accordingly (as he was obliged to do) he made restraining orders in respect of each account. He further ordered, pursuant to s 180 of the Act, that each applicant be examined about his or her affairs and the affairs of the other.

22. By Notice of Motion filed on 27 July 2016 the applicants sought a variety of orders, those being (so far as is now relevant) orders under ss 29 and 30 that the applicants’ interests in the property be excluded from the restraining order (“the exclusion application”). (Since the restraining orders had already been made, the application purportedly made under s 30 was incompetent.)

23. On 16 December 2016 the applicants filed a Notice of Amended Grounds of Application to exclude the property from the restraining order. There are potentially two routes to an exclusion order under s 29. The first is for the owner of the property to prove that the property was never tainted property. (It is to be borne in mind that a restraining order is made on the basis of reasonable suspicion that the property is tainted. A restraining order made on the basis of reasonable suspicion does not represent a finding that the property in question is or was either proceeds or an instrument of an offence.) The second route is for the owner of the property to prove, in accordance with s 330(4), that the property has ceased to be tainted.

24. The applicants stated as the grounds for the application that the funds:

“(a)  [were] not proceeds of an indictable offence … and

(b)  [were] not an instrument of any serious offence.”

These are grounds referable to an application under s 29. However, the applicants particularised their application in a manner referable to s 330(4)(a). As set out above, s 330(4) states the circumstances – the only circumstances – in which property ceases to be proceeds or an instrument of an offence. Implicit in s 330(4) is that there has been a finding, or there is an acknowledgement, that the property has, at some time, been the proceeds or an instrument of a relevant offence. It will be necessary to return to the applicants’ particularisation of their grounds.

25. The examination of Ms Koernia pursuant to s 180 of the Act took place on 27 February 2017, and that of Mr Lordianto on 28 February 2017.

26. On 14 March 2017 the applicants filed a Further Notice of Amended Grounds of Application to exclude property; this appears to be in identical terms to the earlier notice.

27. On or about 23 March 2017 the Commissioner filed a notice setting out the grounds on which he intended to contest the exclusion application. He put in issue all elements of s 330(4)(a) upon which the applicants relied to establish that the property had ceased to be tainted property.

28. It is of some importance that the issues in the present proceedings are those that arise under s 330(4)(a). Whether the “property” (identified as the funds in the accounts) had been proceeds or an instrument of a relevant offence was not in issue. So much was expressly conceded by counsel for the applicants. The issue was whether that property had ceased to be tainted.

The applications for exclusion

29. The particulars given in the Amended Notice of Grounds of the Application set out the circumstances in which the applicants stated that the funds came to be in the accounts. Put briefly, they asserted that the applicants engaged money remitters in Indonesia to pay amounts of money into their CBA accounts, and that the amounts standing to their credit in the accounts reflected those payments.

30. When the present proceedings were heard, on behalf of the applicants it was realistically expressly conceded that it would be difficult to maintain that the funds had not been used in structured transactions, and that they were not tainted. The focus of the applications was therefore on s 330(4) of the Act. For the convenience of the reader, I will repeat s 330(4)(a) (the only s 330(4) circumstance that is said to be applicable):

“(4)  Property only ceases to be proceeds of an offence or an instrument of an offence:

(a)  if it is acquired by a third party for sufficient consideration without the third party knowing, and in circumstances that would not arouse a reasonable suspicion, that the property was proceeds of an offence or an instrument of an offence (as the case requires) …”

31. There are, therefore, five elements to s 330(4)(a):

(i)  that property is acquired;

(ii)  by a third party;

(iii)  for sufficient consideration;

(iv)  without knowledge that the property was the proceeds or an instrument of a relevant offence; and

(v)  in circumstances that would not arouse a reasonable suspicion that the property was the proceeds or an instrument of a relevant offence.

32. The questions marked by the parties for determination were identified as:

• the meaning to be ascribed to “third party” in sub-s (4)(a): that is, were the applicants “third parties” for the purposes of the paragraph?;

• if so, were the interests of the applicants in the property acquired by them for sufficient consideration?;

• were the interests of the applicants in the property acquired by them without their knowing that the property was either proceeds, or an instrument, of a relevant offence? and

• were the interests of the applicants in the property acquired by them in circumstances that would not arouse a reasonable suspicion that the property was either the proceeds or an instrument of a relevant offence?

The onus lay on the applicants to prove each element of the composite question encompassed in s 330(4)(a). As will be seen below, the questions as framed do not adequately identify the issues that determine this application.

The evidence

33. Each applicant made an affidavit and gave oral evidence through an interpreter. As well, they relied on what was said to be an expert’s report which I will consider below.

34. The Commissioner relied on the affidavit evidence that had been put before Hall J to establish the matters necessary for the restraining orders to be made, and additional affidavit evidence of Mr Burtenshaw, who also gave oral evidence and was cross-examined.

35. Much of the evidence was not in dispute. It disclosed the following.

36. The second applicant, Ms Indriana Koernia, is the wife of the first applicant, Mr Sanko Lordianto. They are Indonesian citizens who live in Jakarta. Both have been granted permanent residency in Australia and spend a considerable amount of time in this country. They have a daughter who is an Australian citizen and lives in Melbourne. They plan eventually to retire to Australia.

37. Mr Lordianto is a member of a wealthy Indonesian family who has business and investment interests in that country. In order to maintain their entitlement to Australian permanent residency, and to secure their anticipated future in Australia, they have transferred large sums of money to accounts held in their names in the CBA. The task of managing this aspect of their financial affairs is undertaken by Ms Koernia. For this purpose Ms Koernia was in contact with an officer of the CBA whose business card described her as a “savings consultant”.

38. In order to make transfers of funds to the CBA accounts from Indonesia, Ms Koernia used organisations in Indonesia offering services as “money changers” or “money remitters”. Her evidence in this respect is somewhat controversial, and I will return to it.

39. Over a period of months, multiple cash deposits were made into the CBA accounts, in circumstances that clearly gave rise to a suspicion that structuring activity, an offence against s 142 of the AML Act, was taking place. It is not necessary to detail all of the deposits; a sample will suffice.

40. On 23 October 2013 35 cash deposits were made into the First Cash Investment Account. The bank statement records that they were in amounts such as $7750, $6600, $8000, and many more, all less than the $10,000 threshold for mandatory reporting prescribed by s 43 of the AML Act. The deposits were made at branches as geographically diverse as Chinatown (Sydney), Surry Hills, Dulwich Hill, Marrickville, and other Sydney suburbs; and, in two cases, at Victorian branches. In all, on that date, $271,800 was deposited into that account.

41. A similar pattern of deposits occurred on the following day, 24 October. Sixteen deposits were made, in similar amounts, from different, mostly suburban, branches. The total of deposits was $113,600.

42. On 28 and 29 May 2015, 18 cash deposits, in amounts ranging from $6000 to $9000, were made into the First Cash Investment Account, 10 of them at Sydney branches of the CBA.

43. Over a period between 23 October 2013 and 24 June 2015, a total of $1,528,000 was deposited into the First Cash Investment Account in 217 deposits of under $10,000.

44. Another series of deposits, on 22 October, 23 October and 24 October was made into the Second Cash Investment Account, held in the name of Ms Koernia alone. Over a period between 22 October 2013 and 19 December 2013, $713,997 was deposited into the Second Cash Investment Account, in 173 deposits under $10,000.

45. That alone provides a very strong foundation for an inference that the accounts were being used for offences of structuring as proscribed by s 142 of the AML Act. The inference is strengthened by evidence concerning two men, Leonard Dharmananda Linggo and Kim Ching Cheung. On 30 June 2015, officers of the AFP executed a search warrant on a hotel room in which Linggo was present, and at which Cheung later arrived. The AFP seized, inter alia, a sum of cash exceeding $1 million. On interview, both Linggo and Cheung made admissions to the effect that, on instructions from overseas contacts, they collected from individuals large sums of money in cash, which they later broke up into smaller amounts and deposited into identified CBA accounts. Linggo gave an account of the arrangements under which he made the deposits. This included the use of a serial number from a $5 note, apparently used as a form of identification (given that he would be entrusted with a large sum of cash money). Both Linggo and Cheung were charged with, and pleaded guilty to, money laundering and structuring offences. Extracted from Linggo’s laptop computer was a document entitled “Rekap Australia 2015”, otherwise written in Indonesian. The document, when translated, can be seen to record deposits of cash into various accounts, one of which was the First Cash Investment Account in the joint names of the applicants. Entries for 28 and 29 May coincided precisely with the cash deposits made on the same date into the First Cash Investment Account.

46. These undisputed facts would be sufficient to justify a conclusion that the depositer (or depositers) of the funds:

“… conducted, or caused the transactions to be conducted, in that manner or form for the sole or dominant purpose of ensuring, or attempting to ensure, that the money or property involved in the transactions was transferred in a manner and form that would not give rise to a threshold transaction that would have been required to have been reported under s 43 [of the AML Act]”

and, therefore, that an offence (or offences) of structuring had been committed, and the applicants’ accounts had been used for that purpose. So much was undisputed. (It is, in fact not necessary to reach a conclusion that the funds were either the proceeds or an instrument of an offence; the applicants’ reliance on s 330(4)(a) assumed that.)

47. On the Commissioner’s case, the First and Second Cash Investment Accounts were therefore instruments of serious offences. (Although counsel for the applicants took issue, in passing, with the suggestion that the funds deposited could be instruments of an offence or offences, he did not pursue that.) It was also the Commissioner’s case that the applicants’ interests in the accounts are the proceeds of the offence of structuring. No contrary argument was advanced on behalf of the applicants.

48. For completeness, it should be mentioned that, on 25 February 2015, Ms Koernia deposited, by cheque, $1,500,000 into each of two of the Standard Term Deposit Accounts, and on 16 July 2015 she transferred $1,500,000 from the First Cash Investment Account into one of the Standard Term Deposit Accounts. It was the Commissioner’s case that these funds were taken from the First and Second Cash Investment Accounts, and were, accordingly, the proceeds of the offence of structuring.

49. It is of some importance to note that it is no part of the Commissioner’s case that either Ms Koernia or Mr Lordianto physically made the cash deposits.

The applicants’ case

50. Once it was accepted, as it was by the applicants, that the manner in which the deposits had been made gave rise to an inference that the transactions were structured transactions, and therefore that the applicants’ interests in the accounts were either the proceeds or instruments of relevant offences, the focus shifted to whether, within s 330(4)(a), they had ceased to be either the proceeds or instruments of offences.

51. The applicants maintained that they knew nothing of the manner in which the funds were deposited, and were entirely innocent of any association with any offence of structuring. It will be necessary to examine their evidence closely.

52. The applicants relied heavily on the “expert’s report” mentioned above. The report was prepared by a former officer of the AFP, Mr Murray Smith. (Whether the report is properly classified as opinion evidence for the purpose of s 79 of the Evidence Act 1995 (NSW) does not fall for consideration; in the end, after negotiation between the parties, and considerable redaction of the report, it was admitted without objection. It is more properly treated as factual evidence, although whether of facts of which Mr Smith had personal knowledge is dubious.)

53. Mr Smith gave an account of a practice he said is known as “cuckoo smurfing”. The practice, as described by him, is used as a means of “laundering” money that is the proceeds of crime. It involves the following steps:

“a.  An international ‘Controller’ meets with an Australian crime syndicate head and agrees to launder a specific sum that is the proceeds of crime. The Controller receives a percentage of the criminal funds and is responsible for paying other money laundering syndicate members.

b.  The Controller instructs a complicit ‘Coordinator’, who is the proprietor of a money remittance business usually located in Singapore, Malaysia or Indonesia, to withhold customer remittances to Australia in an amount equalling the sum that the Controller has agreed to launder.

c.  The Coordinator instructs his employees, known as ‘Collectors’ in Australia to collect the criminal cash from the Australian syndicate. The Coordinator asks for the serial number of an Australian $5 note held by the Collector, and passes the number to the Controller.

d.  The Controller supplies the criminal syndicate head with the telephone number of the Collector and the serial number of the bank note held by him. The criminal syndicate head calls the Collector and arranges to meet to hand over the criminal cash.

e.  The meeting is conducted, the Collector provides the $5 note as identification and the criminal cash is handed to the Collector.

f.  The Collector confirms receipt of the criminal cash. The Coordinator provides the Collector with a list of bank account details and cash amounts originally obtained when customers requested the transfer of funds to Australia.

g.  The Collector attends a series of banks, making deposits of the criminal cash under the AUSTRAC reporting threshold (although this is not always the case) until all of the requested remittances have been satisfied.

Once the Coordinator has been informed that all of his customers’ remittances have been satisfied he can release the money originally supplied to him by the remitting customers to the criminal syndicate.”

54. Mr Smith commented:

“The feature of this typology is that neither the criminal cash nor the innocent remittances are physically moved. As long as cash deposits in Australia are kept below the reporting threshold, there is no record, either electronic or physical, that could lead regulatory and enforcement agencies to intervene.”

55. Mr Smith was not cross-examined, and the Commissioner did not take issue with his description of the practice of cuckoo smurfing. Indeed, Exhibit A was an AUSTRAC document dated 2008 in which the practice was recognised as “an emerging form of money-laundering”. It was the applicants’ case that they were the innocent victims of cuckoo smurfing; that their legitimate transactions in Indonesia had been subverted in such a way that the deposits in their Australian CBA accounts were sourced, not from their own funds, but from proceeds, in Australia, of criminal activity, but that, in the language of s 330(4)(a), they were third parties who had acquired their interests in the property for sufficient consideration without their knowledge, and in circumstances that would not arouse a reasonable suspicion, that the property was either the proceeds, or an instrument, of an offence or offences.

56. I have no difficulty accepting that the practice of “cuckoo smurfing” exists. I accept that, on their face, the deposits into the applicants’ CBA accounts have the hallmarks of “cuckoo smurfing”. Particularly is this so, having regard to the statement of Linggo to the effect that the serial number of a $5 note was used as means of identification, consistent with Mr Smith’s evidence. The Rekap document found in Linggo’s laptop computer is also confirmatory.

57. It is of some interest that the applicants did not attempt to avail themselves of the provisions of s 142(2) of the AML Act, by the application of which the deposits might have been shown to be innocent.

58. A difficulty for the applicants, however, is that their reliance on cuckoo smurfing as an explanation for the manner in which money was deposited into their accounts is inconsistent with their particularisation of their grounds for exclusion, which was that the funds they had paid to Indonesian money remitters were transferred into their CBA accounts. The particulars included:

“(ii)  [Ms Koernia] entered into agreements with money exchange and remitting businesses in Jakarta … to pay amounts in Indonesian rupiah in order to purchase … amounts in Australian dollars to be deposited by the Remitters into Australian bank accounts …

…

(iv)  In respect of each relevant transaction, upon the payment by the Applicants of the Indonesian rupiah as directed by the Remitter, the Remitter became indebted to the applicants in the amount that was agreed to be deposited into the Applicant’s Accounts.

(v)  In respect of each relevant transaction … the relevant Remitter caused the Australian dollars purchased by the applicants to be deposited into the Applicants’ Accounts.

(vi)  By depositing each sum in Australian dollars purchased by the applicants … into the Applicants’ Accounts, the relevant Remitter discharged the debt arising from each relevant transaction.

…”

59. Those assertions were echoed in final submissions, in order to establish that the applicants’ interests in the funds in the accounts had been acquired by them for sufficient consideration.

60. Ms Koernia gave evidence through an interpreter. Her evidence included an account of the means by which she arranged for the transfer of funds from Indonesia to Australia. She said that, although in the past she had transferred funds by inter-bank transfers, in recent years she had begun to use “money changers” or “money remitters” in Indonesia. She did this because she had been told that by doing so she could obtain a better rate of exchange, and they did not charge fees. She identified two money remitters she had engaged as “P T Empress Agensiatama” and “Suka Maju Multi Valas”. Between 21 October 2013 and 22 June 2015, in this way, she transferred $4.5 million. At all times she acted on the instructions of the money remitter. This involved her in making a number of deposits into Indonesian bank accounts, for the purpose of making the funds available for transfer to her Australian account. For example, on 21 October 2013 she made two separate deposits, totalling 1,113,750 Indonesian rupiah to two different accounts in one bank, and another of 1,631,250 Indonesian rupiah into another account in a different bank. She said that she did this on the instructions of the money remitter, and had no idea why it was done that way. One deposit was made into the account of a person called Ria Wira who Ms Koernia did not know, and another into the account of a person called Sufin, who Ms Koernia also did not know. The third was made into the account of the money remitter.

61. There were other examples in the evidence of Ms Koernia making transfers of sums of money under 500 million rupiah, into accounts of individuals she did not know. On 5 June 2015, between 1.29pm and 2.02pm, she made five deposits, two into an account held in the name of Karhane Salim (of, respectively, 495 million rupiah and 498 million rupiah) and three into an account in the name of Yanuka Suryad Linata (of, respectively, 400 million rupiah, 300 million rupiah and 327 million rupiah).

62. In cross-examination Ms Koernia said that her instructions to or from the money remitters were never given in writing. She never received any receipts for the large sums of money she deposited in the Indonesian accounts. She said that receipt of the money was “confirmed by way of telephone conversation”, initiated by her. She said “it was all based on trust”. The instructions to her by the money remitter were given by facsimile, but she did not produce in evidence any facsimiles she had received. In order to confirm that the funds were received into her CBA accounts, she telephoned her contact in the relevant CBA branch, who told her what deposits had been made. She tallied these up to ensure that the correct amount had been received. Subsequently, she received paper copies of her bank statements. These disclosed the deposits, the branches at which they had been made, and that they were made in cash. She said that she did not find the need to do the arithmetic (in order to check that the correct amount had been deposited) annoying, because she loved to “play calculating”. She was unconcerned whether the deposits were made in cash or not; she simply wanted to ensure “the number is correct”. She made no inquiry about the nature of the transactions because she felt that it was the obligation of the CBA to call her.

63. She denied suspecting that the making of a large number of cash deposits in a single day was “not usual”. She said that she had “totally no idea and no suspicion” that one possibility to explain the number and nature of the transactions was that they were connected with some form of unlawful activity. She gave the same answer when asked if she suspected that the reason that the deposits were made in the way they were was to avoid Australian mandatory reporting requirements. She said that she had no idea that one possible explanation for the transactions was that they were to avoid Australian money-laundering laws. She denied that she deliberately refrained from making inquiries in order not to confirm her suspicions, or because she suspected that she would be told that the cash “flowing” into her accounts was the proceeds of some form of criminal activity.

64. Ms Koernia was asked about her husband’s involvement in the transactions. While she said that she took responsibility for the financial arrangements, she said that she kept him informed. When he gave evidence, Mr Lordianto confirmed that.

65. When asked about the 5 June 2015 Indonesian transactions, Ms Koernia said:

“Some people don’t like the large amount of money coming into their bank account at one time.”

She said:

“Some people prefer the figure below 500 million rupiah”

66. Ms Koernia was then asked about reporting obligations in Indonesia. The following passage of transcript in Ms Koernia’s cross-examination, as recorded in the transcript, is worth extracting:

“Q.  You knew, didn’t you, that there was a reporting obligation in Indonesia where the threshold is 500 million rupiah, didn’t you?

A.  INTERPRETER:  This has already been reported. This account has been reported. These are our accounts. The bank has already reported.

Q.  So your answer, ‘The bank has already reported these particular transactions,’ how do you know that?

A.  INTERPRETER:  Because - I don’t know. Did you say that we had the obligation to report if it’s over 500 million?

Q.  Ms Koernia, I’m asking you about your answer. Included in your answer you said, ‘These accounts have already been reported by the bank.’ I’m asking you how you know that.

A.  INTERPRETER:  We have this account with this bank. The bank knows. This belongs to Indriana.

…

Q.  You said the money changer told you that some people did not like receiving amounts in excess of 500 million rupiah. Correct?

A.  INTERPRETER:  Yes. They said so.

…”

67. She then said that she thought that those who told her that some people did not want in excess of $500 million rupiah deposited in their accounts were joking. She nevertheless made deposits in that way.

Consideration

68. I have above noted the four issues identified by the parties as the issues for determination. As I have also said above, I have concluded that they do not fully identify the true issues. I have also set out above the five elements necessary for a finding under s 330(4)(a) that property has ceased to be the proceeds of an instrument of an offence. Each must be proved by an applicant before the property could be excluded from a restraining order. To repeat, the five elements are:

(i)  that property is acquired;

(ii)  by a third party;

(iii)  for sufficient consideration;

(iv)  without knowledge that the property was the proceeds or an instrument of a relevant offence; and

(v)  in circumstances that would not arouse a reasonable suspicion that the property was the proceeds or an instrument of a relevant offence.

69. As mentioned above, the Commissioner, in the application for the restraining orders, identified the “property” in question as “Funds Standing to the Credit of [the relevant CBA account] …” in the names of the applicants jointly or in the name of Ms Koernia. Both parties proceeded on the basis that the “Funds standing to the credit of” in the names of the applicants was “the property”. That is a misunderstanding that has given rise to confusion.

(i)  Acquisition

70. The basis provided by s 330(4)(a) on which property ceases to be proceeds or an instrument of an offence depends, first, on there having been an acquisition of the property – that is, the tainted property. So much is obvious. Also obvious is that the acquisition must have occurred at a time after the circumstance that caused the property to be tainted, and therefore provided the foundation for the restraining order.

71. That is, s 330(4)(a) is predicated upon an acquisition of property (by an innocent third party) at a time after the activity or transaction that caused the property to become tainted. In this case, there has been no such acquisition and the applicants’ case fails at the first hurdle. That is for the following reasons.

72. Notwithstanding the characterisation in the Summons of the property as “Funds standing to the credit of” accounts in the names of the applicants, the Commissioner’s submission was that the property in question is not money, but the chose in action represented by the CBA accounts. Counsel for the applicants did not take issue with, and, indeed, adopted, that position. The proposition is in accordance with longstanding authority. In Russell v Scott (1936) 55 CLR 440, at 450; [1936] HCA 34, Dixon and Evatt JJ said:

“The contract between the bank and the customers constituted them joint creditors. They had, of course, no right of property in any of the moneys deposited with the bank. The relation between the bank and its customers is that of debtor and creditor. The aunt and the nephew upon opening the joint account became jointly entitled at common law to a chose in action. The chose in action consisted in the contractual right against the bank, i.e., in a debt, but a debt fluctuating in amount as moneys might be deposited and withdrawn.” (pp 450-451, italics added)

73. Croton v The Queen (1967) 117 CLR 326; [1967] HCA 48 was a criminal case, in which the alleged offender had withdrawn money from a joint bank account without the authority of the joint owner. He was charged with and convicted of larceny. Setting aside the conviction, Barwick CJ, with whom McTiernan J agreed, said:

“The subject matter of the instant charges was money, in each case expressed as a number of dollars, that is, paper money, or coin to the stated face value. That can be asported and be the subject of larceny. But, though in a popular sense it may be said that a depositor with a bank has ‘money in the bank’, in law he has but a chose in action, a right to recover from the bank the balance standing to his credit in account with the bank at the date of his demand, or the commencement of action. That recovery will be effected by an action for debt. But the money deposited becomes an asset of the bank which may use it as it pleases: see generally Nussbaum, Money in the Law: s. 8, p. 103. Neither the balance standing to the credit of the joint account in this case, nor any part of it, as it constituted no more than a chose in action in contradistinction to a chose in possession, was susceptible of larceny, though it might be the subject of misappropriation …” (pp 330-331)

74. Menzies J, who dissented in the result, also commented on the nature of the property in question. His Honour said:

“Because I have found no authorities, other than the line of cases already mentioned and distinguished, dealing directly with the ownership of moneys withdrawn from a joint account, it is perhaps desirable to state my understanding of what happens to the ownership of moneys paid by a bank to a depositor. The money, of course, is originally in the ownership and possession of the bank. When, in accordance with its mandate, the bank transfers the money to some person presenting the requisite book and withdrawal form it parts with both its possession and property …” (p 340)

75. In Citigroup Pty Ltd v National Australia Bank Ltd (2012) 82 NSWLR 391; [2012] NSWCA 381 Barrett JA said:

“41  The accepted analysis of the banker-customer relationship where the account is in credit casts the bank in the role of the customer’s debtor. Money notionally ‘in’ the customer’s account is in truth money owned by the bank which is owed by it to the customer and payable on demand made by the customer by way of ‘withdrawal’: see, for example, Carr v Carr [1811] Eng R 606; (1811) 1 Mer 541n; 35 ER 799; Devaynes v Noble (1816) 1 Mer 529; 35 ER 767; Foley v Hill [1848] Eng R 837; (1848) 2 HL Cas 28; 9 ER 1002.”

Although three other members of the Court (Bathurst CJ, Allsop P, and Meagher JA), joined in a separate but concurring judgment, and Macfarlan JA took a different view with respect to one question in the proceedings, none took issue with what Barrett JA had said at [41].

76. In 1921, speaking of the nature of the contract between banker and customer, Atkin LJ said:

“I think that there is only one contract made between the bank and its customer.”

(N Joachimson (A Firm Name) v Swiss Bank Corporation [1921] 3 KB 110 at 127)

77. In Sutherland Re; French Caledonia Travel Service Pty Ltd (In liq) (2003) 59 NSWLR 361; [2003] NSWSC 1008 at [32], Campbell J interpreted this as meaning:

“… when a customer sues the bank to recover money in its current account, the customer is suing on the banker-customer contract, not suing for repayment of a loan or set of loans constituted by deposits.”

78. As both parties in the present case agreed, the property in question was the applicants’ interests in the bank accounts. Both parties also agreed that the correct characterisation of their interests in the bank accounts was that of a chose in action. That, as the cases cited above show, gave the applicants an entitlement to require CBA to pay to them all or part of whatever amount was credited to the accounts at a time of their choosing. Correctly identified, their property interests were an intangible right to require payment by the CBA on demand. The value of the right varied, depending upon what deposits had been made into the accounts, or what withdrawals had been made. But the interest in the property did not vary: it remained a right to require payment by CBA. The property remained the contractual right to receive from the CBA whatever funds were, at any time, credited to their accounts.

79. Counsel for the Commissioner submitted that “an acquisition of property” is to be distinguished from a “mere receipt of property”, or an increase or augmentation of an existing interest in property, but ran this argument together with an argument concerning whether what was said to have been an “acquisition” by the applicant had been for “sufficient consideration”.

80. The questions are separate, and need to be addressed separately.

81. The property – that is, the choses in action – was acquired when the applicants opened the CBA accounts. So far as the First and Second Investment Accounts are concerned, that was necessarily at a time prior to the commission of the offences. There is no suggestion of any criminality or impropriety at that time. There was no acquisition of property by the applicants at any time after the criminality that tainted the property. Their property in those accounts remained precisely what it had originally been, although of “fluctuating” (Russell v Scott) value. It follows that there was no acquisition of property at a time after the property became tainted, such as to engage s 330(4)(a).

82. Counsel for the Commissioner referred to [116] of the judgment of Allanson J in Commissioner of the Australian Federal Police v Kalimuthu (No 3) [2017] WASC 108 (a case that bore significant parallels with the present, and involved the practice of cuckoo smurfing), which they described as “very compact”. What Allanson J there said was:

“Property includes rights in connection with property: s 338. Mr Ganesh held existing contractual rights against the bank with regard to the current balance of his account. When a deposit was made into his account, his interest then included rights in relation to the additional credit balance, or to the new total credit balance. That is an acquisition of property.”

83. I am unable to adopt this reasoning. The property of the applicants remained what it had always been – a chose in action; a contractual right. Its value rose and fell with deposits and withdrawals. The deposits represented an increment in the value of the property, but did not change its nature, and did not constitute an acquisition of property. There was no fresh or additional loan constituted by the deposits. The applicants had no property in the money deposited. The money was the property of the CBA.

84. I am similarly unable to adopt the reasoning of Mitchell J in Commissioner of the Australian Federal Police v Fitzroy All Pty Ltd (2015) 299 FLR 439; [2015] WASC 320. That was another case in which multiple deposits, in terms below the reportable limit, had been made into an account by an unknown person or persons. Mitchell J accepted that there were reasonable grounds to suspect that an offence of structuring had been committed. He then (at [40]) identified as a relevant question whether:

“The property … the debt owed by [the bank] to Fitzroy in the amount standing to the credit of the Account – was derived or realised, whether directly or indirectly, from the commission of that offence [so as to be proceeds of the offence within the meaning of s 329(1)(a) of the Act].”

85. He concluded, at [41] that:

“Fitzroy’s chose of [sic] action against the bank was partly derived from the deposit of cash into the account …”

86. Counsel for the Commissioner also referred to the extempore decision of Beech-Jones J in Commissioner of the Australian Federal Police v Minh Duc Pham [2015] NSWSC 1383. That was a case concerning forfeiture under s 49(1) of the Act. The circumstances were relevantly similar to the present. Beech-Jones J identified the question at issue as whether Pham’s rights to the funds in the accounts were the proceeds of a contravention of s 142(1) of the AML Act. His Honour said:

“37  … In my view, when the criminality is understood in those terms it follows that the amount standing in a bank account as a consequence of the giving effect to the non-reportable transactions referred to in s 142(1) is clearly property that is either wholly or partly realised or derived, whether directly or indirectly, from the commission of that offence … The relevant property is in a very direct way the consequence of those transactions having been engaged in.”

87. If my analysis above is correct, I would be forced respectfully to disagree with the approach taken by his Honour. However, it may well be that the chose in action represented by the account in that case was the instrument of a serious offence, which would lead to the same result: see Milne v The Queen (2014) 252 CLR 149; [2014] HCA 4 in which, it appears, the High Court accepted that a chose in action (in that case, shares) could be the instrument of an offence.

88. The case may be distinguished from the decision of the NSW Court of Appeal in Studman v Director of Public Prosecutions (Cth) (2007) 177 A Crim R 34; [2007] NSWCA 285. That case also involved property characterised as rights to money in a bank account. However, in that case the account had been opened in a false name, which was an offence. At [43] McClellan CJ at CL (with whom Spigelman CJ and Handley AJA agreed) said that the right to the moneys in the account was derived directly from the commission of that offence. There is no evidence here of any offence of that kind.

89. Some glimmer of support for the approach I have taken may be gained from s 77(1)(c) of the Act. Section 77 is the provision entitling an applicant, in specified circumstances, to compensation where a forfeiture order has been made. Paragraph (1)(c) appears to be a recognition that an applicant might have an interest, less than the whole, in the value of indivisible property. As I have suggested, the value of a chose in action may vary from time to time.

90. For these reasons, I am satisfied that there was no relevant acquisition of property by the applicants or either of them.

91. That is a sufficient basis to dismiss the application for exclusion.

92. The question may be tested by analogy with the use of physical property, an analogy which I will also use for another purpose. Suppose that A and B, a married couple, are the owners of a rural property. While they take an overseas holiday, their son, C, uses a shed on the property for the purposes of trafficking in border-controlled drugs. That is an offence against Ch 9 Pt 9.1 of the Criminal Code (Cth) and carries a penalty, depending on the quantity of drugs trafficked, of imprisonment for at least 10 years, and is therefore a serious offence. There can therefore be no doubt that A and B’s property is an instrument of a serious offence. Even though A and B have no knowledge of C’s criminal activity, their property may be made the subject of a restraining order, provided the other conditions required by s 19 of the Act are met.

93. On their return from their overseas holiday, A and B resume occupation of the property. They cannot, however, resist the making of a restraining order on the property that has become an instrument of a serious offence and cannot succeed in an application for an exclusion order under s 29 because they could not prove that the property was not an instrument of a serious offence. Section 19, it will be remembered, is expressed in mandatory terms. A restraining order must be made where the relevant conditions are satisfied.

94. Nor could A and B bring themselves within s 330(4)(a), because there has been no (subsequent to the criminality) acquisition of property. The property is the same property they owned prior to C’s criminal activity.

95. Suppose, further, that, in order to promote his drug trafficking business, C improves the property by painting, renovating and landscaping. The value of the property is enhanced. But the increment in the value does not, in ordinary language, amount to an acquisition of property. Nor would it be different (for the purposes of s 19, s 29 and s 330(4)(a)) if A and B had paid for the improvements. (Those circumstances may, of course, provide a foundation for refusal under s 49(4), to make a forfeiture order under s 49(1) – see Commissioner of the Australian Federal Police v Fernandez [2017] NSWSC 1197, to be delivered concurrently with these reasons – but that does not arise in this case.)

96. The balance of these reasons will proceed on a basis contrary to my conclusion with respect to acquisition; that is, I will assume that the deposits in the accounts represented an acquisition of property by the applicants, in the manner envisaged by Allanson J in Kalimuthu.

(ii) Were the applicants “third parties” for the purposes of s 330(4)(a) of the Act?

97. So to frame the question immediately prompts another question: “third parties” to what? The Commissioner’s submission was that “third party” as used in the paragraph:

“… identifies a party other than an owner of, or interest holder in, the property whose ownership or interest arose in the transaction(s) which constituted, or was element of, the relevant offence(s). Thus, the expression is apt to identify a subsequent purchaser or acquirer of the property or an interest in the property – that is, an acquirer in a later transaction which is not itself the transaction which constituted the relevant offence. ‘Third party’ necessarily connotes a transmission of property, or in [scil] interest in property, to a new person or entity. It is not satisfied where there is a relevant continuity of ownership in the property or interest at and from the time of the offence.” (italics in original)

98. The applicants’ position was that “third party” refers to a person other than a party to the criminal conduct which caused the property to become tainted. Because the structuring offences were transactions between the depositer and the CBA, the applicants were, relevantly, third parties.

99. A similar submission to that advanced on behalf of the applicants was put to, and rejected by, Allanson J in Kalimuthu. Allanson J gave initially only brief reasons for rejecting the proposition. He said:

“118  I am satisfied that ‘third party’ does not simply refer to someone not a party to the offence. If that was all that was intended, it could have been clearly stated.”

100. In the present case, the Commissioner urged adoption of that conclusion. However, Allanson J went on to identify three further matters that he considered relevant, each of which the Commissioner disowns. Those reasons were:

• that respondent was not in a legal relationship with anybody involved in the transaction that would make the transaction one between related parties;

• that the applicant had no interest in the Australian physical currency, or any property derived from it, before the cash was deposited into his account; and

• that respondent’s position was relevantly no different from that of a person who sells property to a stranger and is paid by direct debit into his account.

The Commissioner argued that each of these was wrong or irrelevant.

101. The use of the term “third party” is infelicitous. Light is cast upon its proper construction when regard is had to the purpose for which s 330(4)(a) was enacted (see Project Blue Sky Inc v Australian Broadcasting Authority (1988) 194 CLR 355; [1998] HCA 28 at [78]). It may, on its face, be seen to have been intended to protect a person who innocently acquires property (for sufficient consideration) unaware of the circumstances in which it became tainted. It is the statutory enactment of the equitable notion of a purchaser for value without notice. A third party is a person to whom property passes – a third party to the ownership of the property. It is the party by whom the property is acquired. The paragraph is concerned with the transfer of property. A person is not a third party only because he or she had no connection with the offence that causes the property to be tainted.

102. The Proceeds of Crime Bill 2002 (Cth) was the subject of an extensive Explanatory Memorandum: Revised Explanatory Memorandum, Parliament of the Commonwealth of Australia, Senate Proceeds of Crime Bill 2002. With respect to cl 330 of the Bill, the Explanatory Memorandum explained cll (1)-(3), (which became sub-ss (1)-(3)) and then dealt with cl (4). It briefly stated its purpose as:

“Subclause 330(4) protects the rights of innocent third parties who acquire the proceeds or instrument of an offence in certain circumstances.”

It then gave an example of how the clause, on enactment, would work. The Memorandum confirms that the third party who gains the protection of subparagraph (4)(a) is a person who innocently acquires property, without knowledge of the circumstances that caused it to be tainted.

103. It is helpful to return to the analogy set out at [92]-[95] above (indeed, it bears similarities with the example set out in the Explanatory Memorandum). In that analogy, A and B’s interest in their property (made an instrument of crime by the serious offence of their son) does not cease to be tainted by operation of s 330(4)(a) as there was no acquisition of the property following C’s serious offence. The purposes of s 330(4)(a), as I have outlined above, are apposite to a situation in which A and B sell the house to D and E. Here, so long as D and E do not have, and ought not to have had, knowledge of C’s conduct, and purchase the property at a commercial value, D and E are innocent “third parties” who acquire the property for sufficient consideration, and the property ceases to be tainted.

103. The ordinary meaning of the words “third party” and the ascertainable legislative intention of the provision, dictate that a “third party” within s 330(4)(a) is a party who is, at the time of the criminal conduct, wholly removed from the property constituting the proceeds or instrument; it is not an owner of property who is wholly removed from the criminality that causes the property to be tainted.

104. I reject the construction placed upon “third party” on behalf of the applicants. The application fails on that basis also.

(iii)  Were the applicants’ interests in the property acquired for sufficient consideration?

106. On this question there was something of a paradox in the applicants’ position. On the one hand, their reliance on the practice of cuckoo smurfing necessarily implied that the funds deposited into their accounts were not the funds they had arranged with the Indonesian money remitters to be deposited. On the other hand, they asserted (both in the notice of the grounds of the exclusion application and in their submissions) that the funds that had been deposited had been acquired by them for sufficient consideration, being the funds they had paid to the various Indonesian accounts in accordance with the instructions of the Indonesian money remitters. The applicants’ submissions were:

“25.  Before each deposit, the exclusion applicants paid the equivalent amount in Indonesian rupiah at the direction of an Indonesian money remitter. That payment created an enforceable obligation that the money remitter procure the deposit of those funds in the Australian accounts (the remittance contacts [scil]). That consideration was ‘sufficient’ in the common law sense in that it was ‘legally sufficient to enforce a promise’, but also reflected the value of the property because it was a commercial exchange rate.

26.  An alternative but equally valid way to consider the passing of sufficient consideration is to recognise that it was not upon payment to the [CBA] that the money remitter’s obligation was discharged. Even after the cash was handed to the bank, that obligation persisted until the bank recorded a credit to the applicants’ account. Only at that point did the applicants acquire the property. The value of the remitter’s obligation was identical to the value of the credit made.”

107. Either position presents a difficulty for the applicants. If the deposits were made in the course of a cuckoo smurfing operation, they were deposited without consideration passing from the applicants to the depositers (or to anybody on their behalf). They were simply gratuitous deposits, and the applicants maintain whatever rights they had (under Indonesian law) against the Indonesian money remitters to whom they had paid the money. The payments made to the Indonesian money remitters were made in consideration of their transfer to the CBA accounts, a transfer that did not eventuate.

108. If, on the other hand, the deposits were made in accordance with the applicants’ directions to the Indonesian money remitters, the practice of cuckoo smurfing is irrelevant. The practice of cuckoo smurfing, as explained by Mr Smith, uses funds different from those provided to the Indonesian money-remitters, and there is no connection between the payments in Indonesia and the deposits in Australia.

109. Moreover, if the applicants’ payments in Indonesia were the consideration for the deposits, there is no apparent reason for the structuring of the transactions in such a way as to avoid reporting. Indeed, there is no apparent reason for the deposits to have been made in cash. Yet, over a two year period, that is what happened repeatedly, and Ms Koernia was kept informed by telephone, and given bank statements, that disclosed the manner and nature of the deposits. The applicants’ reliance on cuckoo-smurfing cannot sit with their contention that they gave sufficient consideration for their interests in the property.

110. I am not able to find that the applicants’ interests in the accounts (even if the property is taken to be funds in the accounts rather than an entitlement to receive the equivalent of the funds standing to their credit in the accounts) was an acquisition for sufficient consideration.

(iv)  Did the applicants know the property was tainted?

111. I approach this question on the basis that it involves an assessment of the subjective state of mind of each applicant. The preponderance of the evidence was given by Ms Koernia, who, both applicants agreed, undertook the management of the family finances, or at least the bank transactions. However, both also agreed that Ms Koernia kept Mr Lordianto informed of the various deposits into the accounts, and the manner in which she paid money to the Indonesian money remitters.

112. Both applicants gave evidence through an interpreter. That made it somewhat difficult to make any assessment of the credibility of their evidence by reference to demeanour. The findings I make are based, not on demeanour, but on the probabilities as I assess them on the whole of the evidence.

113. The relevant circumstances are these.

114. From at least 2013, the applicants adopted the practice of transferring funds by using Indonesian money remitters, rather than by bank transfer, something they had previously done. According to Ms Koernia, she deposited very large sums of money into the accounts of individuals she did not know. She did this, she said, because the money remitters directed her to do so. It involved her breaking up the sums deposited, into amounts less than 500 million Indonesian rupiah. There was indirect evidence, extracted above, that in Indonesian law the threshold above which payments are to be reported is 500 million Indonesian rupiah. However, the evidence is not at all clear whether that is limited to cash transactions or extends to other forms of payment or transfer. In the absence of more specific evidence that Indonesian law requires reporting of transfers (as distinct from cash payments) of 500 million Indonesian rupiah or more, I cannot attribute any significance to that assertion.

115. What is important is Ms Koernia’s responses to questions on this issue. Initially, she said that the payments had been reported; then she said that the money remitters told her that some people did not like receiving amounts of more than 500 million Indonesian rupiah (although that does not explain two deposits of just under 500 million Indonesian rupiah within 30 seconds into the same account); then she said that she thought the money remitters might have been joking when they told her that; and, notwithstanding that, she (at some inconvenience) did make deposits in the smaller sums. This evidence is wholly unconvincing.

116. Further, Ms Koernia was in touch with officers of the CBA in Sydney, who informed her of the multiple cash deposits. Later, she received bank statements that showed unequivocally that cash – not international transfers, as was her arrangement with the Indonesian money remitters – was being deposited into her accounts in multiple transactions of under $10,000. She never thought this odd, or unusual, and never questioned her contacts in the CBA. That also is unconvincing.

117. If the onus were reversed, and lay on the Commissioner to prove that the applicants did know that the property was the proceeds or an instrument of an offence or offences, it might be difficult to be satisfied.

118. In order to urge a finding that the applicants had actual knowledge of the circumstances that rendered the property tainted, the Commissioner relied upon the concept of “wilful blindness”. In R v Crabbe (1985) 156 CLR 464 at 470; [1985] HCA 22, the majority said (in relation to a criminal charge in which actual knowledge was an element):

“When a person deliberately refrains from making inquiries because he prefers not to have the result, when he wilfully shuts his eyes for fear that he may learn the truth, he may for some purposes be treated as having the knowledge which he deliberately abstained from acquiring.”

Later, at 470-1, the majority approved a passage from Professor Glanville Williams’ Criminal Law: The General Part (2nd ed 1961, Stevens & Sons) at 159 as follows:

“A court can properly find wilful blindness only where it can almost be said that the defendant actually knew. He suspected the fact; he realised its probability; but he refrained from obtaining the final confirmation because he wanted in the event to be able to deny knowledge. This, and this alone, is wilful blindness. It requires in effect a finding that the defendant intended to cheat the administration of justice.”

119. Three years later, in Pereira v The Queen (1988) 35 A Crim R 382 at 385, Mason CJ, Dawson, Toohey and Gaudron JJ said (in relation to a criminal charge in which actual knowledge was an element):

“… a combination of suspicious circumstances and failure to make inquiry may sustain an inference of knowledge of the actual or likely existence of the relevant matter. In a case where a jury is invited to draw such an inference, a failure to make inquiry may sometimes, as a matter of lawyer’s shorthand, be referred to as wilful blindness.”

120. I do not find, in this case, the concept of wilful blindness to be helpful. The applicants were well aware, over a period of years, of the unorthodox manner in which deposits were made into their accounts. The onus lies on them to prove that they did not know, and they have not discharged that onus. So far as Mr Lordianto is concerned, his agreement that his wife kept him informed of the manner in which the deposits were made fixes him with sufficient knowledge.

121. In cross-examination the applicants were asked about the manner in which they completed incoming passenger cards on their frequent visits to Australia. It was put to them that, on each occasion, the passenger card required them to declare that they were not importing or exporting Australian currency of more than $10,000. It appears that what the Commissioner sought to do with this was to establish the significance of the figure of $10,000.

122. It is not, however, established that there is any connection between the use of the figure of $10,000 in the separate respects, and I do not place any weight on this evidence.

123. The applicants have not established that the property was acquired without their knowledge that it was either proceeds or an instrument of an offence.

(v)  Were the deposits made in such a way as would not arouse a reasonable suspicion that the property was tainted?

124. The test to be applied in relation to this question is objective.

125. For the same reasons that I am not satisfied that the applicants have proved that they did not know that the property was tainted, I am not satisfied that it was acquired in such a way as not to arouse a reasonable suspicion that it was proceeds of or an instrument of an offence. It is unnecessary to restate the circumstances I have outlined in relation to the previous question.

126. It is to be remembered that these transactions took place over a period commencing in October 2013, and ending in October 2015. It is true that there is no evidence of any such transactions in 2014. However, the bank statements demonstrate a pattern of activity that would arouse a reasonable suspicion in any reasonable person. Moreover, the manner in which Ms Koernia said she was asked to make the deposit in Indonesia is such as would arouse a reasonable suspicion. I am satisfied that the circumstances as a whole were such as to arouse, in a person in the position of the applicants, a reasonable suspicion that something untoward had occurred, or was occurring, in the manner in which the funds they sought to have transferred to Australia were transferred. I could not be satisfied that such a person would have had a reasonable suspicion that the funds in their accounts were the proceeds of an offence, or that their accounts had been used as instruments of an offence. But that is not the question. The applicants have not established that the property was acquired in circumstances that would not arouse a reasonable suspicion that it was the proceeds of an indictable offence, or an instrument of a serious offence.

127. The applicants have failed to demonstrate that the property the subject of the restraining orders has ceased to be the proceeds of an indictable offence (or offences) or instruments of serious offences.

128. For these reasons, the application for exclusion orders is dismissed. The applicants are to pay the Commissioner’s costs.

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Amendments

08 September 2017 - Typographical corrections made - [76], [84], [100], [102]

Decision last updated: 08 September 2017